Why Your City Still Won’t Be Getting Google Fiber

As Silicon Valley salivates over Austin’s Google Fiber good fortune, Northern Californians used to getting first crack at new tech can rest easy — right? After all, if Fiber is going to Austin, how could Google neglect its home turf?

But the company’s Austin expansion offers no assurance that Google plans to bring Fiber to the Bay Area or any other city anytime soon, if ever.

First, apologies to the many Google partisans who say they would drop their current cable company in an instant if Google Fiber came to town. If demand were the only factor driving Google’s decisions, they’d probably be digging up your street today. In a recent Harris Interactive poll on corporate reputations, Google ranked fourth with a score that placed it among the country’s most trusted companies. Meanwhile, Verizon ranked 36th and AT&T 39th, scoring in the C-plus range. Time Warner came in 48th and Comcast 51st, which put them not far above BP.

Despite a market dominated by unloved incumbents, however, Google isn’t in the infrastructure business. They’re in the ad business. As much as Google’s search engine functions like a public utility for the internet, it’s not, just as television shows aren’t produced for the altruistic purpose of entertaining you. Search and TV are just two of many engines that generate inventory in the form of your attention, which is then sold to advertisers.

The more and the faster Google can show you ads, the more money Google makes. But so far Google has done just fine relying on other companies’ wires to deliver those ads to you. It’s hard to believe that Google (closing share price yesterday $777.65) would now decide to upend its business model to undertake the massive capital expense of laying its own cable—that is, its own ad-delivery infrastructure—to your door would seriously undermine

One of the most assiduous reporters on the Google Fiber beat, Karl Bode at DSLReports, writes:

As we’ve noted more than a few times, the goal of Google Fiber is to generate press, gather real-world data on networks and video ad delivery, and light a fire under the pampered behinds of incumbent broadband operators, with the fleeting hope that tomorrow’s networks will come just a fraction more quickly to an uncompetitive market. The goal was never to take the project nationally, though the company certainly benefits from people thinking that’s a possibility.

In other words, Google Fiber acts as a great real-world lab for Google to test the potential of ultra–high-speed networks for its ad business. But in that same real world, Google still wants unloved Verizon, AT&T, Time Warner and Comcast to shoulder the cost of building out such a network to the hundreds of millions of us who don’t live in Kansas City or Austin. (And never mind what Google Executive Chairman Eric Schmidt said a few months ago about Google Fiber being more than an experiment—”we’re actually running it as a business” is not the same thing as saying “it’s our business.)

At the same time, Google knows that merely relying on these broadband providers’ good intentions is about as sound a strategy as believing the cable guy will definitely show up between noon and 5 p.m. In a recent write-up on Google Fiber, analysts at Bernstein Research point out the inherent risk to Google’s business model of depending so heavily on nearly monopolistic ISPs:

“Google is (and should be) concerned about the long-term market power of broadband access providers. … Carriers, which are de facto intermediaries between Google and end-users could, at least in theory, ask Google to pay for service, or at least, for quality-of-service.”

According to Bernstein’s Carlos Kirjner, Google Fiber could be the company’s way of figuring out just what it would take to build its own broadband infrastructure if current providers turn the screws too tightly. That fear would help explain Google’s willingness to spend heavily on its Kansas City and soon its Austin experiments. Kirjner estimates Google is spending about $84 million to lay cable to the first 149,000 Kansas City homes to get Google Fiber. That’s an expensive marketing stunt. But it’s not so much to spend to figure out how to shore up a $256 billion company if broadband providers started charging Google a toll to deliver its product.

Even then, Google would still have a steep climb to broadband independence. To get Google Fiber into 20 million homes—or slightly more than 20 cities the size of Austin—would cost between $10 billion and $15 billion, Kirjner estimates. Then again, that’s in the range of what Google spent to buy Motorola Mobility in an effort to gain greater control over the other major platform for delivering its ads. Still, the wisdom of that decision is far from proven. Until then, it’s doubtful Google will place a multibillion-dollar bet to guarantee you never have to wait for a YouTube video to buffer ever again.